Indicators: March 31

Better Off Debt?

61% is the average percent of their incomes New Mexicans spend on gas, according to a March 17 white paper by analyst firm David Gardiner & Associates.

"We call ourselves the fresh start people."—Norman H Meyer Jr., clerk of the US Bankruptcy Court for the District of New Mexico

In 2005, big financial institutions convinced Congress to “reform” bankruptcy laws, making it much harder for people to escape their creditors. Filings dropped dramatically, but have increased steadily ever since. The following chart shows the rise in monthly bankruptcy filings statewide, from January 2006 through February 2010.

At this rate, Meyer estimates New Mexico bankruptcy filings will reach their pre-reform levels by 2012.

Bankruptcies will keep rising as long as jobs keep disappearing—unless another congressional “reform” delivers as promised. Along with unemployment and divorce, medical bills are among the top reasons people file for bankruptcy. A Harvard University study published last year in The American Journal of Medicine finds that 62 percent of all bankruptcies in 2007 arose from medical debts, with the out-of-pocket cost averaging $17,943.

If those nationwide averages still hold true and apply, in New Mexico it would mean there were 255 medical bankruptcies in Santa Fe County last year.

Last week, US Rep. Ben Ray Luján, D-NM, claimed in a press release that the new health care rules protect people from bankruptcy “due to unaffordable health care costs.”

In fact, the new law specifically does little to prevent medical bankruptcies, other than force insurance companies to stop limiting payouts on individual policyholders. While the new law makes purchasing health insurance mandatory, the Harvard study finds that people with insurance accounted for three-quarters of medical bankruptcies.